On 23 January 2025, the Luxembourg Parliament adopted the law (the “Law“) implementing into Luxembourg law the European Mobility Directive (Directive (EU) 2019/2121) (the “Mobility Directive”) and amending the law of 10 August 1915 on commercial companies and the law of 19 December 2002 on the trade and companies register and the accounting and annual accounts of companies.
This Mobility Directive aims to harmonize the legal framework for cross-border transformations, mergers, and demergers across the European Union (the “EU”), while also enhancing the protection of stakeholders such as employees, creditors, and minority shareholders. It also represents a proactive step towards fortifying the single market, aligning with the European Commission’s vision to bolster company mobility within the internal market, as advocated by the Court of Justice of the European Union through its seminal case law on freedom of establishment.
The Law dated 17 February 2025 was published on February 26, 2025, and came into force on March 2, 2025 (Mémorial A, n°67, page 1). Cross-border operations whose draft terms are published before the Law’s entry into force will continue to follow the general regime, while those published after the Law’s entry into force will fall under the European regime.
The Law applies to cross-border operations involving specific types of companies listed under the Mobility Directive, including Luxembourg public limited liability companies (S.A.), private limited liability companies (S.à r.l.), and partnerships limited by shares (S.C.A.). Companies falling under the Mobility Directive scope benefit from a specialized regulatory regime, which supersedes the general framework that applies to non-EU or non-listed companies.
Importantly, Luxembourg has opted not to extend the European regime to other legal forms, such as cooperatives or collective investment undertakings. Moreover, companies already in liquidation, those in insolvency or restructuring, or those involved in cross-border operations with third countries are excluded from the scope of the new regime.
The process for conducting cross-border mergers, divisions, and conversions under the Mobility Directive is structured as follows:
Minority shareholders who voted against the cross-border operation benefit from an exit right in exchange for adequate compensation. The right of withdrawal must be exercised during the EGM Approval for all shares held by the withdrawing shareholder (except when the CDT permits an exit with a portion of the shares or the shares are held by an account holder as defined under the Luxembourg law of 1 August 2001 on the circulation of securities).
If shareholders disagree with the share exchange ratio, they may challenge it before Luxembourg Courts within one month of the general meeting, seeking additional compensation through Luxembourg courts. However, such legal action has no suspensive effect on the cross-border operation.
Creditors with existing claims are also safeguarded. They have the right to request guarantees from the Luxembourg courts within three months of the publication of the CDT if they believe the cross-border operation may pose a risk to their claims. However, such legal action has no suspensive effect on the cross-border operation.
Employees have the right to voice concerns about the operation at least 5 working days before the EGM Approval. However, these comments have no binding or suspensive effect on the cross-border operation.
One of the most significant innovations introduced by the Mobility Directive is the “double control of legality” mechanism. This process involves a two-step verification procedure, with the notary playing a central role in both stages of the process:
Preliminary Control: This is carried out in the departure country to ensure that the operation complies with legal requirements and is not abusive or fraudulent. In case Luxembourg is the departure country, the notary is required to verify that the conditions stipulated by the Law are fulfilled, ensuring that the cross-border operation is not undertaken for fraudulent or abusive purposes. Upon receiving the necessary documents, the notary will issue a certificate within a period of three months, such a period may be extended for an additional three months if required. The certificate issued by the Luxembourg notary is registered with the Luxembourg Trade and Companies Register and transmitted digitally to the destination country’s authorities.
Final Control: Once the operation passes the preliminary control, the final verification is performed in the destination country to ensure compliance with local laws. In case Luxembourg is the destination country, the Luxembourg notary must confirm that all conditions required for the cross-border operation have been met. The notary may rely on the certificate issued by the relevant authority of the other jurisdiction involved, ensuring the process aligns with the necessary legal requirements.
The Law marks a significant advancement in standardizing the rules for cross-border operations within the EU. While it seeks to simplify and promote company mobility, it also introduces extra administrative requirements and longer timelines compared to non-EU cross-border operations. Companies looking to carry out cross-border operations within the EU should carefully assess the legal implications, especially the enhanced protection for stakeholders and the potential delays arising from the legal verification process.
In case you need further guidance on cross border mergers or support concerning the Law, do not hesitate to contact our corporate team.
Dear users, on 15/06/2022 Internet Explorer will be retiring. To avoid any malfunctioning, we invite you to install another browser, such as Google Chrome, by clicking here, or the one of your choice.
Please check this before contacting us in the event of a problem.
